States’ debts rise to 4% of GDP, says World Bank

Although the second quarter report of the National Bureau of Statistics (NBS) showed that Nigeria had exited recession, several challenges remain at different levels of government, the World Bank has warned.

In a report released in Abuja on Wednesday, the World Bank pointed out some of the challenges at the level of state government in the country, including increasing debts and fiscal deficits.

According to the biannual report, the debts of the states increased from 2.4 per cent in 2014 to four per cent of the Gross Domestic Product by the end of 2016.

Similarly, the fiscal deficit of the states increased from an estimated 0.2 per cent of the GDP in 2014 to one per cent in both 2015 and 2016.

In a statement heralding the report, the World Bank said, “Nigeria’s GDP expanded by 1.4 per cent in the third quarter of 2017 (year-on-year), the second quarter of growth after the recession of 2016, reflecting recovery in oil production, good performance in agriculture, and stronger non-oil industry growth due to the easing of foreign exchange constraints.

“Yet, many fiscal challenges remain at different levels of government, and effort is needed to successfully address those. With shortfall in revenue, fiscal pressure persists at subnational government levels, putting a strain on service delivery.

“The fiscal deficit of states increased significantly from an estimated 0.2 per cent of GDP in 2014, to one per cent in 2015 and 2016. Also, total state debt increased from 2.4 per cent in 2014 to four per cent of GDP by the end of 2016.”

It added, “The states’ fiscal crisis led to two sets of financial assistance packages by the Federal Government. The second – the Budget Support Facility (hinged on a 22-point Fiscal Sustainability Plan) – was advanced in mid-2016 and due to close in mid-2017.

“While all states have made progress on the reform measures included in the 22-point Fiscal Sustainability Plan, implementation is incomplete. The need to strengthen fiscal performance through sustaining the state fiscal reforms that have been accelerated in the past two years is of paramount importance.”

The statement quoted the World Bank Lead Economist for Nigeria, Ulrich Bartsch, as saying that internally generated revenues and spending efficiency needed to increase at the state level.

“In the light of the continuing fiscal pressures, there is a strong need to strengthen the performance of the states through the full and sustained implementation of reforms to increase internally generated revenues and state spending efficiency, and to strengthen state debt management and fiscal transparency,” Bartsch stated.

The World Bank added that its 2018 Doing Business report had highlighted improvements in Nigeria’s investment climate as well as the efforts to diversify the government’s sources of revenue.